Maritime Observer Newsletter #3
Phi to the Supreme Court? Qatar to host a new boat show, and sanctioned yacht to be auctioned off.
Welcome to the third edition of Leisure & Legal, a newsletter covering the latest legal issues of the superyacht industry and the developments of the Middle East leisure marine sector.
MARCH 2024 was ushered in by a fusillade of news coming out of the 2024 Dubai International Boat Show, along with the announcement of a new boat show in the region. On the legal side, a new class action lawsuit in the U.S. may have permanent implications on the brokerage market. Meanwhile, a sanctioned superyacht is now set to be auctioned by the Ukrainian government, while another yacht remains imprisoned by the UK government.
For this month’s insight, I examine the likelihood of the Dalston Projects Limited case being heard before the UK Supreme Court, covering extensity in the first and second editions. Finally, you’ll find this month’s Spotlight, where I profile the remarkable people of the superyacht industry. However this month doesn’t just celebrate one person, but a group of incredible luminaries who turned the superyacht industry into the vibrant sector it is today, the recipients of the World Superyacht Awards’ Legacy Award.
Wishing you an incredible April,
Faisal
· Commission fees become the topic of law in new US class action lawsuit
[YA MON EXPEDITIONS, LLC v. INTERNATIONAL YACHT BROKERS ASSOCIATION, INC. et al]
In a class action lawsuit, Wyoming-based boat dealership Ya Mon Expedtions LLC claims that several large yacht brokerages are in violation of the Sherman Antitrust Act with the inflation of brokerage commissions in recent boat sales
In the 31-page lawsuit, the dealership alleges that the defendants, among them the International Yacht Brokers Association (IYBA) and Boats Group LLC, are part of a large understanding that conspired to force Ya Mon Expeditions to pay an inflated amount to the broker in question of 10% commission generated from the sale price of the boat, subsequently split between both parties involved in the sale.
This filing comes off the heels of a recent class action anti-trust case in the real estate sector where the courts had to reconcile with the question of whether anticompetitive agreements violate antitrust law with home sellers paying inflated commissions to brokers. The case was settled in February 2024 with $208.5 million collectively agreed to be paid.
· Royal Romance to be officially auctioned; Asset Recovery and Management Agency (ARMA) of Ukraine announces
The sanctioned motor yacht Royal Romance is set to be auctioned after ownership was transferred to the Ukrainian government. In January 2024, The Asset Recovery and Management Agency (ARMA) of Ukraine announced that Royal Romance’s ownership would be transferred to Ukraine, following the Croatian court’s ruling, with ARMA planning to auction her off “as soon as possible”. Now, the bidding competition is officially open, as representatives have until April 18th to place their bids. Eligibility requirements, listed on the Arma website require potential bidders not to be placed under any sanctions list, not to have representatives of the aggressor countries, to have a minimum of three years experience in organizing yacht sales, and to have "an impeccable business reputation".
Why was Royal Romance seized? - After the Russian invasion of Ukraine in March 2022, sanctions were imposed on Ukrainian lawyer Viktor Medvedchuk, notorious for his pro-Kremlin views and close rapport with Russian President Putin. Royal Romance, one of Medvedchuk’s assets, was arrested in March 2022, as she was docked in Croatia.
The winning bidder will be announced on April 23rd, 2024.
Dalston Projects Limited vs. The Secretary of State for Transport - Will the Supreme Court grant a “Permission to Appeal”?
Phi, the 60-meter luxury motor yacht owned by Russian businessman Sergei Naumenko, has been the inadvertent face of the UK’s sanctions regime in response to the Russian invasion of Ukraine. After the latest Court of Appeal ruling dismissing Naumenko’s challenge of the High Court ruling, Phi remains docked at London’s Canary Wharf as the Court of Appeal Judges remain in the view that her detention contributes to the overall sanctions regime aiming of pressuring Russia to cease sanctions destabilizing Ukraine or undermining or threatening its territorial integrity.
The appeal in Dalston Projects Limited and others v The Secretary of State for Transport was dismissed in February 2024 alongside a challenge presented by Eugene Shivlder, in what marks the first Appellate Court ruling relating to the UK sanctions regime pursuant to the Russian invasion of Ukraine in March 2022.
What happens now? Typically, after appellants have had their challenge dismissed by the UK High Court or Court of Appeal, the next step would be to take the appeal to the UK Supreme Court. The Supreme Court is the final court of appeal in the UK’s court system for any judicial review. This seems to be the direction for Dalston Projects Limited (the special purpose vehicle for Phi) according to Sir Ian Collett, who is representing Naumenko. Speaking to The National, there are plans to challenge the Court of Appeal ruling at the UK Supreme Court. Yet standing before the Supreme Court is not granted to any case, it must be contingent on the reasons why Naumenko wants to appeal, and if it concerns public importance.
To proceed to a full hearing before this Court, the appellants must obtain a successful “permission to appeal” (PTA) application. If permission is not given from the lower court, then this is determined by an Appeals Committee composed of three Supreme Court Justices. However, this application is only granted under specific cases. A PTA from the Supreme Court is only granted in circumstances where there are principles of the law concerning general public importance, which means most of the cases requesting permission are not given the green light. In the Supreme Court annual report, the Court decided 273 PTA applications, of which only 70 were granted, accounting for a “grant rate” of 26%. The disparate statistics presented begs one question, how likely is it that the UK Supreme Court will grant a PTA to Mr. Naumenko in regards to his detained motor yacht?
The qualifier of “Public importance” denotes that the importance of the case transcends the appeal of Naumenko but touches on general parts of the law. In the event that a successful PTA application is granted, Sir Ian explains that there is a “number of issues within the judgment in which they disagree, and they may form the background to an appeal”.
Back in March 2022, Grant Shapps, then Secretary of State for Transport, detained the yacht under the Russia (Sanctions) (EU Exit) Regulations 2019, where Section 57(b) of the Act states that a mere connection to Russia would suffice as grounds for detention, despite the owner of the asset never being a designated person in the UK, as was the case with Naumenko. During the Court of Appeal hearing, the question that the Court had to contend with was whether the measures used against Naumenko were “rationally connected” to the aim of encouraging Russia to desist in its attack on Ukraine. This ground of this appeal concerned a ruling made by the High Court Judge, deemed the detention of the vessel proportionate, albeit the fact that 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.”. The appellants relied on the crutch of Article 1 to the First Protocol of the European Convention on Human Rights (“A1P1”), noting that the detention decision is a disproportionate interference with Naumenko’s right to peaceful enjoyment of possessions. During the Appellate hearing, The ground of proportionality, under A1P1 of the ECHR, was given great prominence by the Court and is perhaps the most crucial issue the Court had to reconcile with. The Judges had to examine if the detention of Phi was proportionate to the legitimate aim pursued and if the detention was in pursuit of a legitimate aim in the public interest.
If precedent taught us anything about A1P1 cases in the Supreme Court, it is a tall order to argue. The 2013 SC case of Cusack v. London Borough of Harrow concerned a litigator who argued that the London highway council’s decision to forbid him from the right to park on his property (in the interest of pedestrian safety) breached his A1P1 rights. Although the Court of Appeal ruled in his favor, the London council won its appeal at the Supreme Court. Lord Carnwath, sitting as SC Judge, was in the view that “the issue of proportionality is not hard-edged, but requires a broad judgment as to where the “fair balance lies.”. In addition to this case, a more recent SC judgment was also referenced during the Appellate hearing. Lord Justice Singh commented on the recent SC judgment of re Abortion Services when examining proportionality in the context of the ECHR, commenting on the nature of considering proportionality as a matter of substance itself. Therefore for Naumenko’s challenge, how the Supreme Court plans to interpret the violation of his A1P1 rights may be done in a different light than that of the Court of Appeal judges. It also should be noted that the public law aspect of this case could have implications in itself.
A further point to draw attention to when dealing with public cases is the Supreme Court’s observed restraint. A study by Lewis Graham evidenced that there has been a more restrained approach in deciding public law cases by the Supreme Court, notably after the retirement of Lady Hale in 2020. This will make it interesting to see how the case of Bank Mellat v HM Treasury, is approached. A case that was also brought forward by the appellants during the Appellate hearing. The case concerned the legality of sanctioning a single Iranian bank would have a material effect on the Iranian nuclear program. Lord Justice Singh noted that the circumstances of this case differ from that of Dalston, as the motor yacht Phi was the only ship docked at the time of detention. Yet, Bank Mellat still shares similarities in the context of a political aim and respect for the rule of law, therefore it stands to see if the SC Judges will agree with the Appellate Court.
Applications must be made within 28 days of the Appellate Court decision, which would have happened at the time of this publishing. There are many other factors the Supreme Court will take into decision when deciding PTA applications, those of which include the caseload and political involvement. The involvement of a government department, according to a 2020 study conducted by Chris Hanretty analyzing the court process in selecting cases, saw that a public law case bringing a judicial review by a public authority renders the chances of a successful PTA more likely, although the chances of government advantage were not clear, Hanretty noted. Notably, Hanretty also observed a "preference" for public authorities to have a second and third chance to defend their decisions.
Dalston Projects, especially if paired with Shvidler’s appeal, will be a unique case for the Supreme Court to assess. It would be the first SC case that will contend with the UK’s sanctions measures for the Russian invasion of Ukraine and the detention of a motor yacht owned by a non-designated person. Further, the Supreme Court will have to examine the enforcement of these measures, which have become open-ended, and make future appeals to these sanctions a lot more difficult to challenge in the courtroom.
· Qatar Boat Show announced for November 6-9 2024
On March 5th, 2024, a grand pre-launch took place in Doha, Qatar to announce the first-ever Qatar Boat Show (QBS), with the industry's key players in attendance. The event, which prognosticates 20,000 visitors and 500 exhibitors, will take place between November 6 and November 9 2024 at the Old Doha Port.
Over the past few years, The cruise terminal has been transformed into a tourist destination welcoming over 300,00 visitors, completed after four years of construction efforts. Old Doha Port comprises two first-class marinas spanning over 800,00 sqm, and operates at a 450 berth capacity. Within the 450 berths are 100 superyacht dedicated berths for vessels up to 160 meters in length. The two marinas' most recent notable use was the 2022 FIFA World Cup where over 50 superyachts entered the country to witness the action.
News of this event comes as part of Qatar's National Vision 2030, aiming to promote economic growth and tourism appeal. The event plans to display over 95 vessels on land and water, from boats to watercraft to lifestyle equipment and leisure toys.
· Ferretti Group to open new dealership branches in the United Arab Emirates and Oman
During a press conference held at the 30th Dubai International Boat Show in February 2024, Ferretti Group announced the opening of new offices in several parts of the United Arab Emirates, Dubai, Abu Dhabi, and Oman. This news comes months after the shipyard announced the dissolution of its partnership with leisure yachting company Ocean360, Ferretti Group’s regional partner of four years.
·BehneMar Yachting becomes official authorized sales agent for The Italian Sea Group in the Middle East
UAE-based Yachting consultancy Behnemar Yachting will now be the official agent for The Italian Sea Group (TISG) in The Middle East. In an announcement made during the 2024 Dubai International Boat Show, the synergy is described as an “Authorized Sales Agency”; occasioned by TISG’s expansion into the MENA superyacht market. A dedicated pavilion was curated at the Dubai Boat Show to display boats, reproduced in scale, including Admiral Yacht’s “Project Spyder”.
The Quiddities of a Legacy Award Recipient - World Superyacht Awards
“superyachts are shaped by the dreams of their owners, we felt that owners should form the backbone of the judging panel that would be given the task of selecting the winners.”
Words expressed by Roger Lean-Vercoe, chairman of the inaugural World Superyacht Awards (WSA) judging panel. Borne by the premise of having an awards ceremony built on credibility to honour the best yachts afloat, the World Superyacht Awards was conceived in 2005 by Boat International magazine, with the first ceremony taking place in 2006. The endeavor was helmed by a group of individuals who know these yachts inside and out, the owners themselves. it did not take long for the WSA to become the highest recognition an owner, shipyard, or designer could take home.
The process was made clear and transparent from the outset, propritiers of luxury vessels starting from 30 meters, delivered within a certain eligibility period, would submit their yachts for contention. Throughout the year, the judges would visit the yachts themselves, carefully examining every room and every inch, before assembling in what has become a weekend-long affair, to score each yacht individually against a set of criteria. After the scores are tallied, the highest score determines the winner of the World Superyacht Award for that respective category.
For the past 18 years, the majority of the WSA categories have rightfully honored the virtues of the nominated yachts, and on the periphery came an award that honors people who, throughout their careers and lives, shaped the superyacht sector to be what it is today, the Legacy Award. From an Oscar Winner to a former House of Lords member, and the man behind the Maltese Falcon, what exactly are the qualities that fall within the ambits of a Legacy Award recipient? That’s a question best examined by looking at the rich list of previous winners.
Premised on recognizing a person who had made a considerable impact on the superyacht industry, many of the legacy award winners are individuals who have reached the highest levels of success in their field, and that is what led them to their shared love of the sea, even if it was amidst challenging upbringings. Take for example Andreas Liveras, the inaugural Legacy Award holder in 2009, an immigrant who moved from Cyprus to London. Liveras started as a delivery driver for a small bakery, before eventually taking over the business and ultimately becoming the largest frozen cake manufacturer in Europe. He sold the business and founded the charter company Liveras Yachting in Monaco. Although Liveras passed away in 2007 during a tragic terrorist attack in Mumbai, he will always be remembered for her entrepreneurial efforts that made the industry better but are also an emblem of hard work and ambition. A different beginning than that of Sir Donald Gosling (2014 winner), who joined the navy after adopting an affinity for nautical ships at the age of nine, and remained a yachting enthusiast for over 60 years, notably for owning the 75-meter Leander.
And then there are the undisputable leadership attributes, especially in opening doors for the younger generation to follow. Noel Lister (2010 winner), the co-founder of furniture retailer MFI, was not only a big yachting enthusiast who completed a 10-year double circumnavigation of the world with his 31-meter Whirlwind XII, but he also championed inclusivity, particularly to those whose circumstances intercepted their ambitions of entering the maritime industry. Lister always gave back to the community he loved, notably when establishing the UKSA in 1987, a maritime youth charity focusing on guiding aspiring seafarers into maritime employment. While Lang Walker (2018 Winner), a property developer awarded an Order of Australia Officer (AO), is heavily involved in programs that lead up-and-coming yacht builders through philanthropic efforts and apprenticeship programs.
Ingenuity is not an uncommon trait either. Beneficiary of the Legacy Award for having a hand in some of the technical breakthroughs seen today. thanks to the sheer fecundity of their curiosity. The first female Legacy Award winner is Elizabeth E Meyer (2011 winner), who had the title of “Queen of the J-Class” bestowed upon her after restoring the 39.47-meter racing yacht Endeavour in 1984, becoming a catalyst in the revitalization of J Class Yachts. Alex Dreyfoos (2017 winner), an MIT and Harvard graduate, played a part in discovering various new hull forms that aid in alleviating motion sickness on board, including the small waterplane area twin hull (SWATH) concept, which came to life due to the quest to find a cure for his wife’s sea sickness. And then came Tom Perkins (2013 winner), the venture capitalist who commissioned the iconic Perini Navi-built Maltese Falcon. She is an 88-meter yacht that held the title of longest sailing yacht in the world for 18 years and is known because she was the first sailing yacht where the sails are able to rotate based on the wind’s direction.
Jim Clark (2016 winner)’s knowledge of writing software played a role in creating the Hyperion, and the role of his intellect played a role in the creation of yacht navigational systems, it was through his philanthropic efforts that his yacht Athena, was used by scientists for marine conservation research.
Lord Irvine Laidlaw (2015 winner), the former House of Lords member whose conference organize company, IIR, was a catalyst of the Monaco Yacht Show’s early years before becoming the venerated event it is today. While other recipients were involved in establishing the industry in regions of the world. Neville Crichton (2012 winner) is a businessman who was seminal in the establishment of New Zealand’s superyacht-building industry. High Highness Aga Khan (2019 winner), meanwhile, is the founding father of luxury tourism for the ultra-high net worth, establishing the Costa Smeralda Consortium in 1962 to preserve the natural heritage of Sardinia’s north-eastern coast.
Of course, alongside the vast contributions made, many of these recipients are the best boat collectors in the game. it’s why Turkish businessman Rahmi M. Koç (2023 winner) now has the Rahmi M. Koç museum, where the public can take a journey touring his vast collection, including Gonca, a steam tug built in 1907. Or Herb Chambers (2022 winner), who started his career as a photocopier repairman before becoming the owner of one of the biggest car dealerships in the United States, whose fleet includes the 80-meter Excellence.
The 2024 ceremony takes place in May 2024, with the next Legacy Award honoree yet to be announced. And if there is anything to take away from this list, it is that no two winners are the same. Each may have their own journey, struggles, ambitions, and dreams, but if the 13 winners thus far have shown us, it is that these individuals have become the highest ambassadors of change, for environmental purposes, buttressing communities through superyacht tourism, and bringing new innovation into the world.