Maritime Observer Newsletter #1 -
Leisure & Legal newsletter - by The Maritime Observer
Welcome to the first edition of Leisure & Legal - A Maritime Observer Newsletter Happy to have you here!
Each month, I'll be focusing on the latest legal happenings and developments in the leisure marine industry, with a quick roundup of the most recent business news and stories of the Middle East leisure marine industry.
I would love to hear from you and know your thoughts after reading. You can find me at faisal@superyachtobserver.com, or on Instagram at @themaritimeobserver.
Wishing you a fantastic February.
Faisal
Legal
So far, much of 2024’s legal events come from court decisions questioning the legality of the Russian-owned superyachts placed under sanctions. The 2022 Russian Invasion of Ukraine, where countries including the US, EU, and UK imposed sanctions on Russia, brought much confusion to the superyacht industry after the arrests/seizing/detention of several Russian-owned superyachts.
Two years later, we are still witnessing the fate of these vessels, and observing new precedents being set in real-time for circumstances that have never transpired prior, and much of it has proved to tread murky legal waters. For the first fleet of 2024, M/Y Alfa Nero’s crew receives a moment of respite with wages handed out, M/Y Phi remains embroiled in legal battles with the UK government; taking matters to the court of appeal, M/Y Royal Romance will now belong to Ukrainian officials after a Croatian court ruling, and M/Y Flying Fox sees some semblance of normalcy, returning to the charter market while still under U.S sanctions.
Here is everything you need to know about the sanctions conundrum in January 2024 -
A small victory for M/Y Alfa Nero crew(s)
M/Y Alfa Nero, the 81-meter Oceanco yacht embroiled in legal battles since her February 2022 abandonment by alleged owner Andrey Guryev at Falmouth Harbor, is now one step closer to untangling the fleet of mourning issues with the original and current crew being set to receive over a year of unpaid wages, following a ruling of the Antiguan High Court.
The case was brought before the High Court of Antigua and Barbuda in September 2023 on behalf of the original crew, alongside the current skeleton crew who worked onboard the yacht from March 2022 up until April 2023, when the yacht was declared seized and residing in Antigua after the Russian invasion of Ukraine.
Represented by United Kingdom-based trade union Nautilus International and Captain Christopher Malcolm Lewis, a claim was initially filed on March 2023 for €2.24 million, combined with a €439.4 thousand claim filed by non-unioned members that brings a total amount of €2.7million of unpaid wages.
While the exact amount remains unspecified, the crew is awarded wages agreed upon within their original contract, withstanding any of the increases or double pay claimed by the skeleton crew members who have received promotions.
Lürssen’s Flying Fox returns to the charter market for the first time since sanctions came out of the Russian invasion of Ukraine
For the 136-meter Flying Fox’s first tenure at the charter market, the biggest kerfluffle was if Beyoncé’s shoes ruined the boat’s teak. Fast forward to 2022, it’s much more than that.
How does this work? Well, as we continue to see precedents established, the law will be ambiguous. This seems to be the case for charter company Bluewater Yachting Dubai, the central agents of Flying Fox, now advertising the cruising opportunity for 4 million Euro a week, In this specific case, the U.S. Department of Treasury's Office of Foreign Assets Control has seized operations of the yacht’s management company, Imperial yachts, and not her owner. Since she is only under US sanctions, there is no restriction imposed on EU or UK citizens, rendering the yacht to be chartered anywhere in the world barring US waters, and US citizens.
While the owner has never been under sanctions, the yacht herself remains subject to sanctions by the United States therefore making her unavailable to be chartered by any US citizen or to cruise US waters. At the time of her delivery, she was the most expensive yacht on the charter market.
Ukrainian government to claim ownership of seized superyacht “Royal Romance” after Croatian Court ruling
The 93-meter yacht Royal Romance, arrested in Croatia back in March 2022, will now finally see her move from Croatian waters and handed over to the Ukrainian government, the Asset Recovery and Management Agency (ARMA) of Ukraine confirms. The arrested Royal Romance belonged to the Ukrainian lawyer and pro-Russia politician Viktor Medvedchuk.
The decision for the yacht to be transferred dates back to December 2022, with the court officially giving the green light last month. According to the head of ARMA Olena Duma, no legal obligations are intercepting the transfer, and the yacht, set to be auctioned, will see its proceeds go to those affected in Ukraine, a move confirmed by the new additional appraisal she received, according to superyachtnews, as she eyes auctioning.
As of January 25, 2024, Royal Romance is still situated in Trogir, Croatia, according to MarineTraffic.
Deep Dive - M/Y Phi Challenges UK High Court Decision
You may recognize M/Y Phi as the backdrop of then UK Secretary of State for Transport Grant Shapps’ polemic at West India & Millwall Docks in London, delivering a stark warning of how the country plans to address Russian individuals as a result of the Russian invasion of Ukraine, using the yacht as an emblem of Russian power and authority.
There was one issue, however, Phi’s ultimate beneficial owner was never sanctioned.
This would be the overarching theme of Phi’s court battles, contesting the legality of her detention. It was in the sensitivity of the courts to discern between the larger picture of her arrest and the rights of Phi’s proprietor.
Backstory - The yacht initially arrived in the UK in March 2022 to be displayed for the World Superyacht Awards. When it was time to depart to Malta, she was detained by the British police under Mr. Shapps’ directive. Two years later, with a fleet of legal battles, her owner fought for her release to no avail. Her ultimate beneficial owner, Sergei Naumenko, is not a sanctioned individual and has never been connected to President Putin. What's more, the rest of his yachts are free to roam Mediterranean waters with no concern.
Legal grounds
Mr. Shapps relied on The Russia (Sanctions) (EU Exit) Regulations 2019 to detain Phi, made under the Sanctions & Anti Money Laundering Act 2018. Section 57C(1)(b) of the 2019 Regulation states that a mere connection with Russia in any way would constitute a detention. While it was section 57D(1)(a) that gave Mr. Shapps the authority to exercise this decision.
May & July 2023
Dalston Projects Ltd & Ors v Secretary of State for Transport
EWHC 1106/ EWHC 1885
After challenging the continuation of detention direction in April 2022, and January 2023, Mr. Naumenko and Dalton Projects, the corporate ownership structure (SPV), have issued a High Court filing challenging the legality of Phi’s detention.
On 21 July 2023, The High Court ruled that Mr. Shapp’s decision to detain Phi was deemed lawful. High Court Judge Sir Ross Cranston found that although the detention intercepted Mr. Naumenko’s property rights under the European Convention on Human Rights. there was no violation, but the decision to detain the yacht was a legitimate aim in the public interest.
January 2024
Dalston Projects Limited and others (appellants) v The Secretary of State for Transport (respondent)
Shvidler (appellant) v Secretary of State for Foreign, Commonwealth and Development Affairs (respondent)
The briefing above brings us to January 2024, when Dalston Projects took matters to the UK Court of Appeal, challenging the July 2023 decision by the London High Court which rejected the yacht’s release. The proceedings took place between Wednesday 17 and Friday 19 January, with the court justices’ verdict set to come out in the coming weeks.
During the January 2024 proceedings, lawyers representing the Security of State for Transport pleaded that, irrespective of whether Phi’s owner is on the sanctions list or not, the detention decision is paramount for the government’s efforts in encouraging Russia to cease actions destabilizing Ukraine. While Phi’ captain Guy Booth, speaking to BOAT, is in the view that “The detention of Phi cannot be justified as encouraging Russia to cease action against Ukraine. This should have been apparent to the government from the outset,"."The effects of the detention are disproportionate.".
Comment
Phi is only one of the several yachts involved in the sanctions imposed by the UK, US, and EU against Russian individuals. While each yacht had its own set of circumstances, the case of Phi’s detention is a commentary on the UK’s exercise of power and handling of the Russian sanctions regime.
Looking at M/Y Amadea, for example, the Russian-owned yacht seized by the US government in Fiji, the Treasury Department was able to prove the owner’s cause of violations of U.S. law and rationalize her detention. Contrasting this with Phi, it is a puzzling endeavor to discern how the owner’s connection to Russia would be cause for arrest.
Reading the July 2023 case brought about questions and not many answers to what the legal justification is for this seizure if the yacht’s owner is not sanctioned. What does it say about the sanctions regime when the only connection is the individual's nationality? & how is the “objective test” for establishing the link to Russia hypothesized? So far, it has not been a legible process.
It remains to be seen what Court of Appeal Justices Geoffrey Vos, Rabinder Singh, and Phillipa Whipple come to decide next month. One thing is for sure, the ruling will undoubtedly set a precedent that will cause a ripple for all future cases of this nature. If ruled in favor of the appellant, the panacea for the attendant financial damages should be very intriguing to witness.
Business
Now onto some business and legal news concerning the Middle East leisure marine industry
Abu Dhabi Chamber announces the launch of Abu Dhabi International Arbitration Centre - arbitrateAD
ArbitrationAD, Abu Dhabi’s new Arbitration Centre, is the latest development of Abu Dhabi’s global arbitration hub. ArbitrateAD, which supplants its predecessor the ADCCAC on February 1st, 2024, will manage new disputes under new arbitration rules, appoint in ad hoc proceedings, and facilitate advanced hearing facilities. It is important to note cases pending under the ADCCAC will not be enforceable under the new arbitration rules. The arbitrator’s list, new arbitration laws, and hearing facilities remain undisclosed and are expected to be published soon.
How does this impact the superyacht sector? With the UAE’s new Federal Maritime Decree coming into promulgation next month, which permits any foreign individual or entity to fly the UAE flag, where this aptly timed launch of an arbitration centre with new arbitration rules will greatly benefit the superyacht sector. In the event of a buyer not being satisfied with their purchase, or if issues regarding contractual specifications emerge, provisions may be made in the sale & purchase contract for disputes to be dealt with within UAE jurisdiction. As a method of dispute resolution, arbitration will provide a more flexible and confidential, among benefits, form of litigation.
Sunreef Yachts‘ UAE manufacturing facility complete; set for grand opening in Ras Al Khaimah
Sunreef continues its quest to expand to the Middle East market. Last February, the Polish shipyard inaugurated its Dubai offices and announced plans for a manufacturing unit falling on 60,000 sqm of land. The facility, which provides a 360 approach to yacht building, began operations back in July of 2023, and has completed its halls and infrastructure, the shipyard announced.
Saudi Red Sea Authority and Saudi Investment Recycling Company (SIRC) sign MoU at the Saudi Tourism Forum
The SIRC and Saudi Red Sea Authority have signed an MoU at the Saudi Tourism Forum this week aimed at enhancing the environmental landscape of the region. The MoU's objectives focus on "ensuring environmental protection" through collaborative projects, along with facilitating waste management and recycling initiatives wherever marine tourism activities are taking place.
OMNIYAT acquires D-Marin's Business Bay Marina
Gulf-based real estate development group OMNIYAT announces acquisition of marina management company D-Marin's Business Bay Marina. Under the new acquisition, that took place in September 2023, the 157-berth Marina will remain under the management of D-Marin