Maritime Observer Newsletter #2
Court of Appeal determine the fate of M/Y PHI, Saudi Arabia introduces a new temporary admission scheme, and a spotlight on the first Emirati female ship captain Sahar Rasi
Welcome to the second edition of Leisure & Legal.
A newsletter where, each month, I'll be focusing on the latest legal happenings and developments in the superyacht industry, with a quick roundup of the most recent business news and stories of the Middle East leisure marine industry.
FEBRUARY 2024 proved to be a busy month, capped off by the 30th edition of the Dubai International Boat Show, with a Court of Appeal ruling that will have sizeable implications. On the legal side, news stories regarding motor yachts for sanctioned individuals have seen the next step in this interminable two-year period, while I also take a look at the upcoming UAE Maritime Code, which will allow any foreign entity to fly the UAE flag on their sterns.
Meanwhile, the business front of the region’s marine leisure industry provided developments that will shape the next chapter of Red Sea cruising with a new temporary entry scheme, as well as new dealers coming into the Kingdom of Saudi Arabia.
Finally, you will find an inspiring, if not moving, story on Captain Sahar Rasti, the first Emirati female ship captain.
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.
I wish you a fantastic month ahead.
Faisal
United States government plans to sell seized motor yacht AMADEA after strenuous maintenance costs
US v. M/Y Amadea, 23-cv-09304, US District Court, Southern District of New York.
The 106-meter motor yacht Amadea was seized in May 2022 while docked in Fiji after her owner, Suleiman Kerimov, was placed under the U.S. sanctions list due to the Russian invasion of Ukraine, Mr. Kerimov's third time becoming a designated person in the US.
The yacht was transferred to the USA from Fiji in June 2022, where it resides today. However this past month, the treasury department revealed that the maintenance costs of the yacht amount to 600,000 USD a month, totaling over 7 million USD annually, a burden the department is struggling to keep up with. Therefore, the US Marshalls Service is urging the judge to grant permission for the auctioning of the yacht, a court case reveals. The filing went on to add “The carrying costs for the Amadea are far from modest, and there is good cause to spare the Government and the public from bearing these costs.” According to Reuters, should the government succeed in her sale, the proceeds will towards those affected in Ukraine.
As the story developed, Mr. Kerimov came in violation of the sanctions by obtaining over 1 million USD in running cost fees for the yacht by way of the US. the financial system, Because of this, Amadea is now subject to forfeiture. To add more confusion to the mix, another Russian oligarch, Eduard Khudainatov, claims to be the proprietor of the yacht. Mr. Khudainatov, who is under no sanctions by the US, is taking steps to take ownership of the self-proclaimed Amadea. Mr. Khudainatov was given a deadline of February 23 by the prosecutor to respond to the request. No update has been given since.
Russian national Vladislav Osipov charged with five counts of bank fraud in connection to the motor yacht M/Y TANGO
On February 22, 2024, the U.S. Attorney's Office revealed five new counts of bank fraud against Swiss resident Vladislav Osipov, an employee of sanctioned Russian businessman Viktor Vekselberg, owner of the 77.7-meter motor yacht Tango.
The press release reads “Osipov and his employees instructed the yacht management company to avoid doing business with banks in Tango’s true name. The management company, thereafter, devised a scheme to use a false name for the yacht, “the Fanta,” to hide from financial institutions that payments were ultimately for the benefit of Tango and Vekselberg, a practice to which Osipov and his employees assented.”
Tango is the first motor yacht to be imprisoned by the U.S. government, while Deputy Attorney General Lisa Monaco, at the time of confiscation, adds “the Department of Justice delivers on our commitment to hold accountable those whose criminal activity strengthens the Russian government as it continues to wage its unjust war in Ukraine.”.
Court of Appeal rules in favor of The Secretary of State for Transport; finding the High Court’s decision to M/Y PHI’s seizure lawful
Dalston Projects Limited and others (appellants) v The Secretary of State for Transport (respondent)
Not the denouement her owner, captain, crew, and spectators hoped for, the 60-meter motor yacht Phi will continue to be indefinitely detained in London. After the latest round of several legal battles in battles in the United Kingdom, the Court of Appeal dismissed the appeal set forth by the yacht’s owner that challenged the legality of the High Court’s July 2023 decision. The ruling, released on February 27th, 2024, crystallizes the Court’s stance on the detention of the vessel and reaffirms the aims of the government in the role of the vessel in regards to the invasion of Ukraine.
The motor yacht is built by Dutch shipyard Royal Huisman for Russian businessman Sergio Numyenko. She was delivered in 2021, after which made her way to London for an awards showcase. Her time docked in London coincided with the Russian invasion of Ukraine. Pursuant to the invasion, countries including the US, EU, and UK began to impose sanctions on Russian individuals with the aim of pressuring Russia to cease sanctions destabilizing Ukraine or undermining or threatening its territorial integrity. While the owner behind Phi was never placed under any sanctions list, then Secretary of State for Transport Grant Shapps ordered for the yacht to be detained under the amended EU Russia Regulations Act 2019. A move complemented by Mr. Shapps himself visiting the yacht down at Canary Wharf, standing in front of her with filming a video stating that this was a message to “Putin and his cronies”. The owner of the yacht was not known at the time, although later disclosed to the Transport Department.
The full history of Phi’s legal battles with the government of the United Kingdom can be read in last month’s issue.
Court of Appeal Hearing
The issue that Sir Geoffrey Vos, Lord Justice Singh, and Lady Whipple had to reconcile with was if the High Court’s decision to keep Phi detained was lawful. During the High Court proceedings in July 2023, Sir Ross Cranston ruled that Mr. Shapp’s decision to detain Phi was in fact deemed lawful. The High Court judge 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.
To argue the case, the claimants presented six grounds of appeal. Four based on public law grounds [2.3.4.5], one ground on proportionality under Article 1 Protocol 1 (“A1P1“) of the European Convention on Human Rights (“ECHR“)[1], and one ground on conversion [6]. The grounds are stated in the order given during the Court hearing.
Ground 2 - Proper Purpose
What is it? Proper Purpose is a doctrine that states the duty of directors to act within the scope of the power granted by the articles of association. In other terms, only exercise powers to which they conferred.
At the time of the yacht’s detention in March 2022, "Mr. Shapps relied on the [amended] Russia (Sanctions) (EU Exit) Regulations 2019, 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. There in the High Court ruling, the Judge found that the justification of being “connected to Russia” is sufficient to permit the detention. Before the Appealte Court, therefore, the appellants argue the High Court Judges’ decision to find the detention of Phi sufficient merely due to the owner’s Russian nationality is unjust.
Precedent Relied on: Padfield Principle [Padfield v Minister of Agriculture, Fisheries and Food [1968] UKHL 1] - In this case, the Minister of Agriculture was found to have acted for an improper purpose. exercising his powers to avoid any “political embarrassment”.
Why the Court rejected this ground: The Appellate Court found that the terms of the legislation under which Mr. Shapps relied, Russia (Sanctions) (EU Exit) Regulations 2019, are clear. The Judges are of the view that the discretionary power exercised was not under improper purpose, as Mr. Naumenko’s connection to Russia will suffice due to his residential status being there. Under Ground 1, which will be discussed below, the Judges elaborate more on the circumstances of Mr. Naumenko and how his “connection to Russia” allowed him to attain his current wealth. The judgment on Ground 1 corresponds to this Ground.
Ground 4 - Taking into account irrelevant considerations in the First Detention Decision in March 2022
What happened? In the March 2022 detentions, the remarks made by Mr. Shapps broadcasted message included the description of Mr. Naumenko being an “oligarch" who had "made their money through their association with President Putin whilst he is going into Ukraine". In the July 2023 High Court hearing, the claimants contended this is an unevidenced claim. The High Court dismissed this ground as Sir Ross Cranston deemed the statement said by Mr. Shapps in 2022 “excusable political hyperbole”.
Why the Court rejected this ground: Ultimately, the Appellate Court found it wrong to call Mr'. Shapps statement “Excusable Hyperbole” by Sir Cranton. Despite this acknowledgment, the Appellate Court believes that the High Court Judge remains right in his decision to dismiss the ground. No public law error vitiates the decision, concluding that there is nothing substantive in this complaint.
Ground 3 - Failure to state the grounds for the original detention
One of the issues that the court had to reconcile with is whether the detention direction provided proper grounds for the detention of the vessel. Under this ground, the appellants give rise to the Transport Department’s failure to comply with the express requirements of Russia (Sanctions) (EU Exit) Regulations 2019 Sections 57(5)(c) and (d). The requirements include The department did not state the grounds for why the ship was detained.
Precedent Relied on: R v South Gloucestershire Appeals Committee, ex parte C [2000]. The appellate court gave light to this case in a more prominent capacity than the High Court during the July 2023 hearing. The case involves a dispute over a planning decision regarding the building of a bungalow for a disabled person made by the South Gloucestershire Appeals Committee. The court held that the Appeals Committee did not properly consider the claimant’s disability in making the decision. While this case was taken into consideration by the Appellate Court in relation to Phi, the Court found that the decision of this case needs to be seen in its context.
Why the Court rejected this ground: Although the Appellate Court has given this ground more priority than the High Court, the judges felt that the Direction in this case was sufficient in stating the grounds of detention. The Appellate Court shared the view of the High Court, in regards to Ex Parte C, where Sir Cranston believed “the statutory scheme here does not require the giving of reasons.”
Ground 5 - the nature of the April 2022 decision was that it was a “holding measure”
On April 11th, 2022, a further ministerial submission was made by Mr. Robert Courts MP stating the detention of Phi should be maintained until further evidence is collected.
In the July 2023 hearing, the claimants contended that this holding measure was no longer pursuing a legitimate aim and had become disproportionate. The defendants went on to add that the proportionality terms of this justification were impaired as there was no rational connection to the aims of the sanctions regulation to find a balance between community and individual rights.
Why the Court rejected this ground: Much of this Ground concerned the semantics of MR. Court’s statement. the Appellate Court was in agreement with Sir Cranton that there is an undue emphasis placed on the words of Mr. Courts, and further reaffirming that the statement made was interpreted to say that the evidence collected would not only be from the side of the Transport Department, however, it is an opportunity for Mr. Naumenko to present evidence as well. The Courts referred to the letter delivered on May 26 2022 by the Appellants as materilzation of the statement made.
Ground 1 - Proportionality under A1P1
Protocol 1 Article 1 of the the European Convention on Human Rights provides that Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.
The grounds of this appeal concerned a ruling made by the High Court Judge which deemed the detention of the vessel proportionate, albeit that Mr. Naumenko had “no proximate responsibility for the events around Ukraine, and could not have been said to have assisted the Russian regime”. The main test of proportionality the Court relied on concerned “the extent to which the decision will contribute to the overall objective needs to be balanced against the benefit to the general interests of the community.”
Precedent used: Bank Mellat v HM Treasury (No 2) [2013] UKSC 39; [2014]. In this case, the Court asked if the sanctioning of a single Iranian bank was logically capable of having a material effect on the Iranian nuclear program when other banks were not being sanctioned. After this case was brought to the attention of the Appellate court, Lord Justice Singh asked, if there were ten ships in the UK waters and the Secretary of State only detained the Phi, this analogy would be more relevant. In the Ruling, the Court found Bank Mellat incomparable with the case of Phi. This is because Phi was the only Russian ship present in London at the time. of the invasion, with the view of other ships facing the same imprisonment as Phi had any been present at the time.
There are two main elements to this ground that the Appellate Court had to contend with. if the detention of Phi was proportionate to the legitimate aim pursued. And is the detention in pursuit of a legitimate aim in the public interest?
For the former, the Court considered if the proportionality assessment by Sir Cranton was “wrong”. When assessing if Mr. Naumenko’s right to enjoyment is interfered with the Courts found that the context of the vessel is a luxury motor yacht must be taken into account. Although there is a violation of Mr. Naumenko’s enjoyment, the Court rejected this ground on the basis of his normal daily life not being affected in a way that experiencing hardship would. Therefore, the Appellate Court found Sir Cranston’s judgment to be right. As for the argument put forward of Mr. Naumenko having no affiliation with the Putin regime, the Court ruled his wealth was a product of tacit acceptance, benefiting from the Putin regime. This ties into limbs two and four of the Bank Mellat test and if the means adopted (wealth accumulated) had a “rational connection” to the end game.
Ground 6 - Conversion
What is conversion? - In public law conversion is known as an unauthorized act of exercising dominion or control over someone else's property, which deprives the rightful owner of their property rights.
In this case, the appellants contend that, by the detainment of his vessel, Mr. Naumenko is deprived of his property. The unlawful detention intercepts Mr. Naumenko’s right to enjoy the property in its intended way.
Why the Court rejected this ground: dismissed since previous grounds have been rejected. Ground 6, in relation to conversion, will only rise in the case of the appeal succeeding. During the hearing, the Master of the rolls argues that conversion must take place at a certain time, giving the analogy of stealing one’s book “If I come in your house and steal a book from your bookshelf I commit I convert that book when I take it off the shelf”. In the case of Phi, the vessel was not taken anywhere, but rather imprisoned.
Comment -
The Appellate Court has made its ruling. The absence of Mr. Naumenko in the UK sanctions list certainly throws a wrench certainly adds a more complicated layer in determining the fate of this case, however, the Judges are in the view that this was not of relevance in the grand scheme of the UK’s plans in detaining the Phi. It is a translucent ruling, in my opinion, which will allow the government to focus on putting pressure on Russia as this war escalates. What stood out to me in this Hearing, is the omission of mentioning the status of Mr. Naumenko’s other yachts. While the Courts acknowledged Mr. Naumenko owning other vessels, it was in the context of assessing the violation of his rights under the ECHR. No assertation was made as to why his other vessels are free to roam the EU and beyond. Perhaps the Appealants felt it was not of necessity in this case. More on this issue below.
What happens now?
If one had to adumbrate, as Mr. Naumenko has exhausted all possible legal remedies. to challenge the legality of his motor yacht’s detention, the Appealants would take their case to the UK Supreme Court. According to Bloomberg, Mr. Eugene Shivdler, whose Court of Appeal hearing took place alongside Mr. Naumenko, plans to take the Judge’s ruling to the U.K Supreme Court. To do so, they must obtain permission from the Supreme Court. An “appeals committee” comprised of three Supreme Court justices shall then determine if the appeal raises an arguable question of law.
The new UAE Maritime Code allows any foreign entity to fly the UAE flag, will its absence from the Paris White List prove to be a detriment?
For owners in the early stages of owning a yacht, the choice of flag serves as the most crucial decision to make, as it will have a direct effect on every aspect of ownership from tax, privacy, functionality, and exposure to liability.
On March 24th, the UAE will promulgate its 2023 Maritime Law Code. The new code will repeal the previous Maritime Law code, which has been in operation since 1981. The most significant change for the maritime leisure sector would be the widened scope afforded for flag registration under the UAE jurisdiction. In the past, any foreign-owned yacht wanting to fly the UAE flag could not do so, and any charter business requires the yacht to be at least 51% owned by an individual or entity carrying a UAE nationality.
The new law, however, jettisons this law in favor of an extended range of scope that now permits any foreign individual or entity to fly the UAE flag, according to Article No. 13 (b) of the 2023 Maritime Law. Individuals or entities with an office or domicile managing the vessel in the UAE may fly the flag for the first time ever.
While a welcome and long overdue change, there still may be ambivalence from any foreign entity considering flying this flag on their sterns. Taking a step back, when a prospective owner is in the process of selecting their flag of choice, it has become conventional wisdom to opt for a flag that is accepted within the shipping industry, as well as by governments around the world. A widely used reference point comes in the form of the Paris MoU list. Hopefully, the UAE will make it’s way towards attaining a spot on the White list, with it’s current placement on the -Non-listed flags having undergone IMO (V)IMSAS Audit- list proving to be a step in the right direction.
Further amendments include the acknowledgment of Acceptance of Letters of Undertaking (LOU). For releasing arrested vessels, any LOU issued by P&I clubs is now a form of valid security. By having this form of security, litigation may be largely avoided with the streamlining dispute resolution process. The new law also focuses on stronger environment protection measures, and greater transparency and accountability among other commercial and fiscal amendments.
Saudi Arabia introduces a six-month temporary entry regime for foreign vessels
In the next step towards opening up the region as an international yachting destination, the Saudi Red Sea Authority (SRSA), in collaboration with the Zakat, Tax and Customs Authority, released a procedural guide for the temporary entry of foreign tourist marine vessels into Saudi Arabian waters.
The temporary entry regime allows any vessel to enter Saudi Arabia for a six-month (180-day) period. This goes into effect immediately and includes “cruise ships, yachts, mega yachts, pleasure boats and vessels, diving boats and vessels, marine tank vessels, recreational submarines, and personal marine vessels”, and sailing ships (including catamarans).
The guide divides the types of pleasure crafts into three categories. Human-powered watercrafts up to a length of 9 meters, sailing yachts less than 24 and over 24 meters, and motor yachts less than 12 meters, between 12 and 24 meters and over 24 meters. For sailing and motor yachts, the duration of the scheme is up to 12 months and is subject to renewal for the same length. This scheme applies to any tourist transiting within the Kingdom and any maritime vessels flying a foreign flag.
Vessels entering the Kingdom for the purposes of exhibition are eligible for temporary admission, subject to regulations. this applies to vessels of any size and type. The scheme, however, does not apply to cargo ships, research vessels, water taxis, and fishing and power boats for racing.
Dubai International Boat Show signs long-term deal with current venue Dubai Harbour
The Dubai International Boat Show (DIBS) will continue its existing relationship with Dubai Harbour following the successful 30th edition of the show. DIBS, a staple of the Middle Eastern maritime calendar, has been residing in Dubai Harbour since its return in 2022. The partnership finds an agreement to invest in more infrastructure to serve future editions of the boat show, with room for expansion. The 31st edition of DIBS, returning in 2025, eyes an increased participation from international partners, through the implementation of new, ambitious concepts and formats.
As to why the event will continue it’s partnership with the venue, Tixie LohMirmand, Executive Vice President at Dubai World Trade Centre and an organiser of the show, explains that “Dubai Boat Show and our host venue Dubai Harbour are committed to accelerate this unstoppable momentum of partnership with our international community, to build the next most outstanding and sought-after yachting hub in the world. We are proud to secure a long-term home for Dubai Boat Show here at Dubai Harbour. This shall give investors the confidence and trust to fast forward their long-term development plans in the region.”
Centouno Navi reaches agreement with Saudi Arabia’s Durah al Fodah; bringing its range to the Kingdom
Viareggio-based shipyard Centouno Navi will now see its line of 16-37 meter yachts cruise the Red Seas, in a new partnership with Durah al Fodah, a company founded by His Royal Highness Naif Bin Abdullah Bin Saus Bin Abdulaziz Al Saud. The agreement took place in December 2023, and according to Boat International, also includes the purchase demo purchase option.
CentoUno Navi - A brand that focuses on minimalism and performance, founded in 2021 by designer Manuela Lucchesi and naval architect Marco Arnaboldi. The yachts in their portfolio include Vespro, Forza, and Eterea, and a ubiquitous feature in their builds is speed, with yachts reaching up to 60 knots of maximum speed while minimizing environmental impact.
What does it mean to be the first? Being scared but doing it anyway.
Anyone who meets Captain Sahar will notice a glittery bedazzled brooch in the shape of an anchor affixed to her pea coat. Scientists postulate that our fascination with glitter and gloss stems from an evolutionary attraction to the sea. For Captain Sahar Rasti, the first Emirati female ship captain, her love of the sea goes back to her childhood days. Albeit a fear of swimming, her circuitous path led her to achieve a feat that is not only commendable but will always be remembered as the first.
She aspired to join the industry in December 2015, but opportunities were limited for the same reasons women in the UK or USA are being given. At times it was because the men in charge feared for her safety, and at other instances, it was because it was simply unheard of. This never stopped her from wanting to pursue this field but even made her more tenacious. Alongside her role at the helm of the ship, she is the founder and chairman of the trading company SJR group, but it didn’t always come easy. In fact, it has never been a seamless entry for women in maritime all across the globe.
For all the innovations and breakthroughs achieved, the nautical industry suffers from a paucity of gender diversity. Female captains account for less than 10% of the fleet. This issue is not only limited to captain positions but extends to the whole maritime workforce. Although positions held by women in the industry are seen all throughout the corporate front, the dearth of women in positions perceived to be reserved for their male counterparts is evident. For example, in the UK, female harbour masters are far and few in between. Only 3% of women are cruise ship captains, even though there is as many cruise ship captains as there are airline captains. There is much work to be done. The question remains, however, why there is such an acquiescence towards placing women in more -arduous- tasks?
A mother of three, Captain Sahar Rasi always followed what was expected of her in society, even being the only one of her siblings to drop out of her studies to get married. She adhered to the tradition of being expected to raise a family instead of working. This only lasted until she wanted more for herself, and decided to pursue a career.
Joining the country’s Navigation Services department as an administrative assistant, it did not take long for Captain Rasti to notice that there were no women in the division. A brief inquiry as to why made it known it was simply the case that it is a male-dominated field. Still not taking - no - for an answer, Capt. Rasti pleaded for a chance to experience working in the sea. Through persistence, she was given the opportunity and was made sure to know it wasn’t going to be a walk in the park. On her first day, she was given a 5 am start time, the future captain, was handed a scrapper and tasked to clean the buoys. She did not shy away from the grunt work given to her.
The 12-hour shifts continued for one year until Captain Rasti graduated with an IALA* certificate, before joining the captain’s program in the following year. Today, Captain Rasti stands as a trailblazing woman in maritime. She did not just break down the barriers imposed on women in the workforce and what is expected of them, she walked through obstacles to create a bridge for others to follow suit. Currently, there are around 60-70 aspiring women registered in the academy dedicated to training up-and-coming seafarers, a feat practically unheard of when she first undertook this journey.
There is much more work to be done before the gap of gender disparity starts to minify. To invite more women into the field starts with making it known that it is a possibility. It’s why part of Captain Sahar’s days involves a lot of putting herself out there, doing interviews and fairs all over the world, something akin to a campaign. Increasing her visibility increases the chances of others to come across her story. What else could be done? According to Captain Kelly Gordon, speaking to Boat in 2021, it may be in the sensitivity of the recruiter to give rise to more female roles. Making it more of an initiative to recruit women by encouraging, advocating, and facilitating events solely dedicated to young women.
Hopefully, the times change from celebrating the “firsts” to becoming the norm.