GLOBAL-WIDE: An Introduction

Yachts are at the pinnacle of a luxury asset lifestyle, but behind the enviable image of floating palaces cruising the world’s most stunning coastal regions lies a complex legal, fiscal and regulatory environment that all industry stakeholders must navigate. Welcome to the world of the superyacht lawyer, charged with unravelling this uniquely challenging world.

A superyacht is typically defined as a pleasure craft with a length overall in excess of 24 metres. Superyachts exceeding 100 metres in length overall are increasingly common, and EUR400 million is no longer the ceiling price for the world’s flagship yachts. The need for expert legal advice has never been greater.

Beyond Inflation 

While much of the world faces higher-than-target inflation with cost-of-living challenges, these macro-economic conditions do not appear to have had much, if any, effect on the superyacht sector. Brokerage sales figures are down on the “COVID years”, but they are still high by historic standards. Order books for the leading yacht-building shipyards remain close to full, with the availability of large new-builds for delivery within the next three to four years limited to opportunities arising in relation to distressed buyers.

It remains to be seen how demand for new-builds will look in the coming years – will the wait for capacity hamper demand?

The Effects of War 

There can be no doubt that the war in Ukraine has had an impact on global yachting since Russia’s invasion in February 2022. Historically, approximately 10% of the superyacht fleet was ultimately beneficially owned by Russians. This figure has dropped in the last year, and could possibly drop further as global sanctions expand their reach in pursuit of an end to the conflict in Ukraine. The statistics also show that Russians tend to buy larger-than-average yachts, with overall Russian superyacht tonnage representing 15% of the fleet. This is perhaps one reason why the number of large yachts (80 metres and over) under construction has been down in recent years. But the world of superyachts is proving to be resilient and opportunistic.

Growth in the Middle East 

The UAE is an example of that resilience, with a significant expansion in capacity that has been helped by being an important jurisdiction for many impacted by sanctions, and the growth in service provision in the region has followed suit.

Aside from the impact of the war in Ukraine, there has been a palpable increase in the superyacht footprint in the Persian Gulf. Many of the world’s largest yachts are now ultimately beneficially owned by individuals from the region. Owner interest is matched by the investment of European shipyards and service providers making their way into the Gulf. This is without doubt a region to watch over the next decade.

COVID-19 

We continue to see the ongoing impact of the COVID-19 pandemic affecting the superyacht industry, largely in the shape of construction delays and disputes dating back to 2020/21.

VAT in the EU 

In the EU, enforcement in respect of VAT remains a growing trend. Where, historically, yachts were able to operate in potentially fiscally abusive ways, it is clear that EU VAT authorities have grown wise to this, and see yachts as relatively low-hanging fruit with very significant benefits if a claim can be sustained.

It is therefore more important than ever for owners, prospective owners and service providers to understand the VAT rules within the EU and follow them. With EU VAT hovering around 20% in most member states, failing to take advice (or indeed, failing to follow it) can have extremely costly consequences if your “VAT paid” yacht is found not to be. Cryptocurrencies continue to make waves in the superyacht industry, despite the crypto-winter which has dominated recent times. Crypto yacht sales are happening, and should only be expected to increase, particularly as cryptocurrencies are subject to increased levels of regulation.

Environmental Impact and Public Perception 

Perhaps the single biggest challenge facing the superyacht industry is its environmental impact. There is no escaping the fact that the very act of constructing a superyacht has a negative environmental impact. While in recent years many have paid lip service to the need to make yachting more sustainable, the industry now has no choice but to make wholesale improvements if it is to survive in the long term.

Linked to environmental impact is the public perception of superyachting. To many, a superyacht is the ultimate symbol of the excesses of the wealthy. While there are many positives that come from superyachting, and indeed many superyachts are used for good the world over, the industry cannot avoid the fact that it consumes huge levels of resources for the benefit of the very few.

In the next decade, there will be tremendous developments in cleaner and clean energy in superyachts. Alternative means of propulsion are already being implemented in flagship projects currently under construction. Arguably though, until a consensus is reached as to what is the alternative fuel of choice, it is difficult to see how today’s enterprises will shape the yachting of tomorrow. Consensus is needed in order for the complete supply chain to develop worldwide.

With larger yachts already subject to International Maritime Organization (IMO) requirements, and net zero 2050 ambitions now being targeted, reducing the impact of each and every superyacht on the water will be the dominant feature of yachting for a generation.

Now, more than ever, it is vital that all superyacht owners embark on their yachting endeavours with a well-constructed team of advisers spanning technical, operational, fiscal and, of course, legal specialisms. To do otherwise is to set oneself up for a very challenging superyachting experience.